The World Gold Council reports strong demand for the physical metal by consumers, industry and central banks in the first quarter of 2013 relative to the same time last year. This growth in demand was offset by lower speculative investment demand in the form of financial assets such as exchange-traded funds, which precipitated the recent price decline.

According to the 2012 Thomson Reuters GFMS Gold Survey, the all-in cost of gold, which includes exploration and mining, is approximately $1,150 per ounce. As the price approaches this level, miners will cease production, thereby reducing supply and placing upward pressure on its price.

From a realistic production standpoint, the price of the metal is hovering at close to its short-term equilibrium price.

The price of gold will trend upward over the next few decades due to its inherent value as a medium of exchange that provides greater purchase power parity over time and geography. This will be possible when the metal serves as reserve collateral for sovereign fiat currencies to limit imprudent credit and debt formation.

Currently, the market value of all gold in circulation is approximately one-third the value of our global money stock, which includes currency in circulation and excess bank reserves for loans. This represents approximately 20 percent of the total money supply, which includes credit formation. Collateral reserves in the range of 10 percent to 20 percent will serve as a strong financial and economic stabilizer.

Given the irresponsible manner in which the government and financial industry have behaved in recent decades when fiat currencies were decoupled from gold, it seems imperative that we back our global currencies with gold and possibly other production-based assets. When this occurs, the value of these reserve assets will continue to rise.

Given the irresponsible manner in which the government and financial industry have behaved in recent decades when fiat currencies were decoupled from gold, it seems imperative that we back our global currencies with gold and possibly other production-based assets.